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Why are prices rising, but inflation is falling?

Understanding why prices are still going up while inflation is supposed to be falling can be confusing and frustrating. Despite the overall trend, prices are still climbing due to factors like disruptions in the supply chain, higher transportation costs, and geopolitical uncertainties. But what does this mean for you? It means your budget might feel tighter as essential goods and services become more expensive. Paying for your basics, such as your mortgage, health cover, groceries and sundries might be more of a challenge. In this post, we’ll explore why prices are on the rise, discuss what the future might hold for consumers, and how Hennelly Finance can help you keep your finances under control.

Q: What are the key drivers behind the persistent rise in prices?

A: Despite a slowdown in the overall rate of inflation, prices continue to climb, driven by various factors. The aftermath of the Russian invasion of Ukraine has disrupted global supply chains, leading to shortages and pushing up costs across multiple sectors. This includes essential commodities like food, where prices have surged by up to 25% over the past few years.

Q: How do disruptions in supply chains contribute to price increases?

A: Supply chain disruptions create bottlenecks in the flow of goods and services. This scarcity drives up prices as demand outstrips supply, particularly for items like food, energy, and transportation fuels. Consequently, consumers bear the brunt of these elevated costs, even as overall inflation rates show a downward trend.

Q: What role do transportation costs play in driving up prices?

A: Transportation costs, including those associated with fuel and air travel, have been significant contributors to rising prices. Higher fuel prices, driven by geopolitical uncertainties and increased demand, directly impact the cost of transporting goods, leading to higher prices for consumers. Moreover, higher airfares further exacerbate the burden on consumers, contributing to the overall upward trajectory of prices.

Q: Are there any sectors where prices have seen a decline despite overall inflationary pressures?

A: While certain sectors may experience temporary declines in prices, such as clothing and footwear during sales periods, the broader trend points towards upward price movements. Sectors like health insurance, recreational activities, and cultural services have witnessed sustained increases in prices over the past year, further complicating the narrative of falling inflation rates amidst rising prices.

Q: What can be expected in terms of future price movements?

A: Looking ahead, consumers can anticipate continued pressure on household budgets as prices for essential goods and services remain elevated. However, there may be some reprieve on the horizon. Energy suppliers are projected to reduce prices later in the year, offering relief to consumers grappling with high energy costs. Additionally, potential interest rate cuts by the European Central Bank could further alleviate some of the economic strains caused by the ongoing inflationary pressures.

Q: What strategies can help mitigate the impact of price rises on household budgets?

A: With the advice of a good financial advisor who can provide insight based on your specific situation, there is actually quite a lot you can do to relieve the burden of price rises on your budget. For example, Hennelly Finance can investigate whether you are on the very best rate for your mortgage, and if a better package can be identified, can help you make the switch. Switching your mortgage can help you save thousands over the life of your home loan. Our health specialists can also do a complete review of the health insurance market to find the best value health cover for your needs and budget, and offer advice about how to tailor your cover to reduce the premium. In particular, Hennelly Finance offers a cash flow modelling service which can be invaluable during a time of financial uncertainty.

Q: What is cashflow modelling and how can it help me?

A: Cash flow modelling is a helpful way to understand your current financial situation and plan for the future. By examining your income and expenses, you can create a detailed picture of your finances now and in the future. It’s important to keep your cash flow model updated with any changes in your circumstances. As your circumstances and goals change, even small adjustments can have a significant impact over time, so it is important cash flow modelling is part of your regular financial appraisal process. If you’re struggling with budget challenges due to price rises, cash flow modelling can be particularly useful. It helps you understand how these economic factors impact your finances and allows you to make adjustments to your spending and saving strategies. By identifying areas where you can cut costs or increase income, you can better manage your budget and stay on track toward your financial goals. It also helps in exploring scenarios such as whether you have enough financial protection if you can no longer work, whether early retirement is feasible, and how to manage large expenses like a house purchase or long-term care.

If you’re feeling unsure about your finances in these uncertain times, reach out to us for a complimentary chat to find out what opportunities are available to ease the pressure on your budget. From switching your mortgage for a better rate, to making savings on your private health insurance and securing higher rates for your savings, our team specialises in helping you meet your financial goals. Give us a call today on 091 670 123 to find out how you can navigate the impact on rising prices on your finances.

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Hennelly Financial Services Ltd. t/a Hennelly Finance & Health Insurance Shop is regulated by the Central Bank of Ireland. Directors R. Hennelly. Registered in Ireland, Company Reg No: 327276.
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